Miller v. Rodriguez

This
matter comes before the Court on a motion for sanctions by
non-parties William Krause, Ellen Barag, and HiReli LLC
(collectively, the “Third Parties”). The Third
Parties move pursuant to Federal Rule of Civil Procedure
37(a)(5)(B) and “the Court's inherent powers”
for an award of attorneys' fees and costs incurred in
responding to a motion by Defendants to compel compliance
with two subpoenas. On August 18, 2017, the Court conducted a
hearing that was originally scheduled to address both the
motion to compel and the motion for sanctions. However, at
the hearing the parties advised the Court that they had
resolved the issues underlying the motion to compel, and that
motion was withdrawn. For the reasons below, the Third
Parties' motion for sanctions is denied.

I.
BACKGROUND

In
February 2017, Defendants' counsel engaged a process
server, Guaranteed Subpoena, to serve a deposition and
document subpoena directed to HiReli LLC
(“HiReli”) on Mr. Krause at his home in Blue
Bell, Pennsylvania. Tr. 67:16 to 68:1.[1] After receiving
the subpoena (the “February subpoena”), Mr.
Krause emailed Defendants' counsel to advise that
“[t]he subpoena received appeared to be a copy of a
single cover page” that referenced, but did not
include, an “Attachment A.” ECF No. 22-1 at Ex.
A. In that email, Mr. Krause stated that he assumed that the
reference to “Attachment A” was boilerplate so he
was taking no action other than to “hold[] the
date” for the deposition. Id.

Defense
counsel responded to Mr. Krause and, while noting that the
process server's affidavit stated that both the subpoena
and attachment had been served, emailed Mr. Krause and
HiReli's counsel a copy of both the subpoena and the
attachment. Id. Ex. B. After receiving a copy of the
attachment, Mr. Krause emailed defense counsel requesting a
three-month extension of time to respond because the
documentation requested was “extensive”.
Id. at Ex. C. Defense counsel and HiReli's
counsel then conferred regarding a new return date. Defense
counsel was agreeable to a two-week extension, but it does
not appear that agreement on a firm date was ever reached.
See Id. at Exs. D-E.

Two
weeks later, having received no response to the original
subpoena, Defendants' counsel engaged a second process
server, DRG Legal, to re-serve the subpoena on Mr.
Krause/HiReli. Tr. 69:17-18. Defendants also directed DRG
Legal to serve a deposition subpoena on Ms. Barag at the same
address. Ms. Barag is Mr. Krause's wife and an officer of
a corporation with a relationship to HiReli. After delivery
of the subpoenas (the “March subpoenas”), DRG
Legal provided Defendants' counsel with an affidavit
attesting that service was effected on both individuals on
March 24, 2017. Tr. 70:15-16.

On
April 4, 2017, defense counsel and counsel for the Third
Parties communicated by phone regarding the subpoenas. Tr.
71:1-9; ECF No. 21-10 ¶ 5. At that time, counsel for the
Third Parties advised defense counsel that due to a family
funeral, Mr. Krause would be unable to attend his deposition,
which was noticed for April 7, 2017. Defense counsel was
agreeable to choosing a new date. On April 5, 2017, counsel
for the Third Parties emailed defense counsel proposing to
produce Mr. Krause for his deposition on May 2, 2017, but
only if certain “conditions” were met. ECF No.
21-11. These conditions were that Defendants would depose
only Mr. Krause (and not Ms. Barag) and that the Third
Parties would produce documents responsive to only three of
Defendants' ten document requests. Counsel for the Third
Parties characterized this “offer” as “an
effort to reach a productive compromise on [the] subpoenas,
” and stated the “reasoning” for this offer
was that (1) “Bill's and Ellen's knowledge is
largely duplicative”; (2) the “other
topics” in the document request “are all
materials in the possession of the parties [to the underlying
litigation]” and have presumably been already subject
to discovery in the course of the litigation; and (3)
“it would be highly burdensome for [the Third Parties]
to produce such materials.” Id. In an April 6,
2017 email rejecting this proposal, defense counsel stated
that Defendants could not rely simply on a bare statement
that Ms. Barag's and Mr. Krause's testimony would be
duplicative and that, while there might be some overlap in
document discovery, Defendants believed that HiReli was in
possession of materials not in possession of any party. ECF
No. 19-2 Ex. D. Defendants further stated that it was
“not a compromise” for Ms. Barag “not to
appear pursuant to a validly served subpoena.”
Id.

After
further email exchanges the next day confirming that
Defendants would not agree to the Third Parties'
“compromise” regarding the subpoenas, counsel for
the Third Parties asked defense counsel to send proof of
service for the subpoenas. ECF No. 19-2 Ex. D. On April 7th,
counsel for the Third Parties emailed defense counsel with
“responses/objections to the subpoenas …
purportedly served by Defendants on Ms. Barag and Mr.
Krause.” ECF No. 19-2 Ex. E. The first of several
objections was “lack of or improper service.” Tr.
76:25 to 77:6.

On
April 11, 2017, Defendants' counsel responded to the
objections by letter and provided the Third Parties with
declarations from the process server attesting to service.
Counsel for the Third Parties responded by email on April
12th and stated that as long as Defendants continued to
“refuse to negotiate … a solution by which
[Defendants] could conduct reasonable discovery of [the Third
Parties], the Third Parties would continue “to stand by
their objections and defenses to [the] subpoenas.” ECF
21-13. In particular, counsel's email asserted that
“there has been nothing close to actual and proper
service here, ” and further alleged that
Defendants' process server provided a “demonstrably
false proof of service” because Ms. Barag and Mr.
Krause were at their second home in Delaware at the time
personal service was allegedly effected in Pennsylvania.
Id. According to Ms. Barag, they received the
subpoenas when they returned home from Delaware on March 28,
2017, finding them “sitting in a mail pile …
brought in from [the] mailbox.” Tr. 44:19-21.

Defense
counsel contacted their process server regarding the alleged
service upon the Third Parties, and on April 12th provided
the Third Parties' counsel with work orders from the
process server, executed at the time of service, that
contained accurate physical descriptions of Ms. Barag and Mr.
Krause. Id. In response, counsel for the Third
Parties argued that it was “not surprising” that
the process server “knows what Mr. Krause and Ms. Barag
look like” because “he served them” with
the first subpoena in February. ECF No. 22-1 Ex. H. He
further provided defense counsel with a copy of a receipt
from a restaurant in Delaware, timestamped 8:45pm March 24,
2017, that, according to the Third Parties, was evidence that
they were not in Pennsylvania on the evening service was
purportedly made. Id.

Defendants'
counsel remained unconvinced, and in her email response
pointed out that the process server engaged to serve Ms.
Barag and Mr. Krause in March (DRG Legal) was not the same
process server that delivered the subpoena in February
(Guaranteed Subpoena).

Counsel
further asserted that the fact that Ms. Barag and Mr. Krause
“may or may not have had dinner in Delaware
approximately 2.5 hours [after service was allegedly made]
and then remained at their vacation home for several days is
not inconsistent with the process server's
statements.” ECF No. 22-1 Ex. I. Finally, defense
counsel pointed out that Ms. Barag and Mr. Krause live in a
private, gated community, and the process server would not
have been permitted entry at the security gate unless the
guard had received permission from Ms. Barag or Mr. Krause.

Finally,
in what appears to be the last communication in a long string
of emails, on April 13, 2017, counsel for the Third Parties
emailed Defendants' counsel EZ Pass records and a series
of security camera photos allegedly showing activity at the
Delaware home as further support for the contention that Ms.
Barag and Ms. Krause were not in Pennsylvania at the time in
dispute. According to the Third Parties, this evidence showed
that Mr. Krause and Ms. Barag left their Blue Bell home the
morning of March 24th to travel to their Delaware
home and did not return to Blue Bell until March
28th.

There
appears to be no responsive email from defense counsel.
However on May 4, 2017, Defendants filed a motion to compel
the Third Parties' compliance with the subpoenas.
Defendants' motion to compel relied primarily upon the
declaration of Christopher Lemerise, an employee of DRG
Legal. In his declaration, Mr. Lemerise states that he
personally served Mr. Krause ...

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